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Tesco beats crunch with big sales hike

It'll take more than a pesky little global financial crisis to stop retail behemoth Tesco in its tracks...

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Published: 30 Sep 2008

Last Updated: 06 Nov 2012

Tesco reported its latest results today, and as usual, they’re mightily impressive: pre-tax profits in the six months to August 23 soared 10% to £1.5bn, on the back of total sales of £25.6bn – a 14% jump. And despite market researchers suggesting Tesco has actually been losing market share to rivals, like-for-like sales were up by about 4%. So it’s clearly doing a great job of getting existing customers to spend more money, at a time when most people are trying to spend less. Tesco boss Sir Terry Leahy reckons his firm is ‘at its best in tough markets’ – judging by these figures, he appears to have a point...

The figures, which are broadly in line with analysts’ expectations, show that Tesco is doing a better job than most in coping with the current slowdown. In a bid to protect its position from low-cost retailers like Aldi and Lidl – the latest TNS figures suggested Tesco has actually been losing market share to both, plus Asda and Morrisons – it’s recently launched a ‘Britain’s Biggest Discounter’ campaign, cutting prices across the board and recently launching a new line of 350 cheap products. The resilience of its sales suggests the plan is working, particularly since non-food sales growth has actually slowed a bit since last year (as you’d expect). 'Good progress', Leahy called it today, in his typically ebullient style.

Another reason why Tesco has weathered the recent storm is the strength of its business outside the UK. International sales were up by another 27%, including a 16% rise in Asia and a 33% hike in continental Europe – and with retail space expected to increase by 25% this year, there’s no sign of this growth slowing. The only real fly in the ointment was US chain Fresh & Easy, which cost the group about £60m during the period – although Tesco dismissed these as ‘planned start-up losses’ and suggested that the new business was already enjoying sales well above the US industry average.

Leahy also had some good news for customers in his media appearances this morning (in which for once, his steadfast refusal to get excited about anything seemed to strike just the right note): he thinks food price inflation has peaked and will now ‘slowly subside through the second half’, which should mean not only lower shopping bills, but also interest rate cuts. And as usual, Tesco seems well placed to profit if spending picks up...